Break …


As everyone has noticed, I’ve been taking some time off from writing. This is just a (well-earned) break, also the chance to take care of some long-overdue business.

I know it’s weird out there, maybe not quite this much …

Thanks for your patience!

steve

47 thoughts on “Break …

  1. Eeyores enigma

    Like I have been saying all over the place the tptb needs to maintain the illusion that it is still possible for anyone to get rich. If that illusion is ever popped…it all over…wild in the streets…total chaos. So we will always be told things are just about to get a whole lot better. They lie!

    “Why “Nothing Matters”: Central Banks Have Bought A Record $1 Trillion In Assets In 2017″

    http://www.zerohedge.com/news/2017-04-21/why-nothing-matters-central-banks-have-bought-record-1-trillion-assets-2017

    Plus this – “About 30 percent of the jump in the S&P 500 between the third quarter of 2009 and the end of last year was fueled by buybacks, according to data compiled by Bloomberg.”

    http://www.zerohedge.com/news/2017-04-20/paul-tudor-jones-has-message-janet-yellen-be-terrified

    Everyone I know, even those who have been raised on understanding the constraints, now believe and are acting as if nothing ever happened and it is all good…the future is growth.

  2. Tagio

    Steve, that video hurt my eyes! No, G*d, no!
    Things must be pretty bad not far below the surface, ZH just reported that ECB and BOJ purchased over $1T in assets in the first quarter of 2017. http://www.zerohedge.com/news/2017-04-21/why-nothing-matters-central-banks-have-bought-record-1-trillion-assets-2017. Wowzers!
    Have to wonder how much of that was energy company bonds. Seems like, eventually, the CBs of the world will end up purchasing most of the world’s financial assets, replacing all those dodgy and collapsing “money equivalents” with actual fresh bank deposits to save banks, prop up housing values and maybe save the 401ks, and thereby preserve social “stability” by keeping the apparatchiks that serve the interests of the top 1% wedded to the system. That won’t solve the pension fund crisis though, that will require an actual bailout if they want to keep all the public pensioners also content.
    It’s like watching a juggler with more and more spinning plates. You just wonder how long he can keep it going.

  3. Creedon

    I think that what you all are talking about is the key. They can effectively create fiat money out of thin air forever. When debt is not restrained by collateral, Steve calls this vandalism. Well, I have news for you, the CBs are vandalizing to beat the band. What I have not seen is anybody give a good explanation of what happens in the world when fiat money is printed without restraint. At the Debt Bubble Bulletin, the moderator has been watching for years as the debt bubble continues to increase in size, supposing that there will be consequences. John Williams says that there will be hyperinflation. Another outcome would be that slowly, over a decade or so the wealthy will become wealthier and the poor, poorer until ultimately there is a revolution or the poor are destroyed. There could be a great war or maybe some unseen black swan is just over the horizon. One certainty to me is that as debt gets greater and greater, interest rates on the debt get lower and lower. In the U.S. our money still buys things because we still have oil. When oil can no longer be purchased the dollar will be worthless.

    1. steve from virginia Post author

      Debt expands exponentially because the only way to retire maturing debt is to borrow more. This is the creditor’s concern when a potential borrower comes through the bank’s front door looking for a loan; will this person or firm come borrow again later? If the answer is no there is no loan! All new loans have to be large enough to rollover the balance of the previous loan(s) … plus interest … plus enough left over to fund continuing operations. Over time the expansion of credit becomes significant as it is now, hundreds of trillions of dollars. How significant does it have to get before it all blows up? Who knows?

      Right now the productivity of credit is negative, that is, adding more credit does not produce more business activity: credit surplus like all the others is subject to ‘The First Law’. Also, increased credit cannot call forth resources that are gone. No additional activity, and yet credit increases relentlessly. Why? The system must have credit because industry offers no ‘real’ returns! In this sense the world is a bit like Greece, but on a larger scale. We borrow our profits, using credit to fool ourselves …

      How long can you fool yourself if you really set your mind to it? who knows?

      At some point the cost of debt service consumes the entire lending capacity of a system. This is the Minsky Moment (not Minsky’s ‘Minsky Moment but my own variation). That occurs in a perfect world where there are no failing institutions to bring down counterparties or accounting control frauds. Both took place in 2008-09, same thing is likely to occur even as the system is well short of the degree of exposure when all of finance system borrowing capacity is absorbed by debt service.

      As for the ‘CB’s vandalizing: this is a myth but a persistent one. I’ve explained this over and over but I must have not done a good job. Any – every bank does four things and four things only: lend, don’t lend, borrow and don’t borrow. That’s it (maybe they also rent office furniture). There are also two kinds of banks: commercial banks (which make unsecured loans) and central banks (which cannot make unsecured loans).

      Commercial banks lend new money into existence, that is, they make loans in excess of collateral or without collateral at all = ‘leverage’. I call this ‘the bank exporting its losses to its customers’. As the bank lends, it exports losses enabling it to keep the profits; this means the bank is ‘strong’. (A weak bank cannot export its losses – make enough loans to stay in business). The outcome is the commercial bank becomes less solvent over time: as Murray Rothbard famously said, “The bank is insolvent because it lends money it doesn’t have”. One way or the other the commercial banks’ destiny is to fail (no different from other firms actually). It is either too weak and cannot ‘sell’ its product (its own losses) or is too strong and is over-leveraged (it makes too many loans that are not repaid).

      Commercial banks hedge their exposure by having a capital structure which includes ownership with investment ‘skin in the game’: a percentage interest- or stake in the firm equal to a reasonable demand for funds from liability side. The commercial bank ledger does not have to balance exactly (assets = liabilities) because the bank can borrow any funds it might need (or it can lend its own excess funds) to other banks in the interbank markets. This is what the ‘Libor’ is all about, (London Inter-Bank Overnight Rate) the interest rate banks charge each other for short-term loans.

      Central banks act as lenders of last resort, when the interbank market is roiled and liabilities (depositor demands) cannot be met by the banks’ own ‘capital’ or ability to borrow from the other banks. The central bank will guarantee the commercial bank liabilities indirectly by providing a market for commercial bank assets. In other words, these assets are collateral for central bank loans: the central bank must accept only ‘good’ collateral that would command its face price on a market … when it is not distorted by a panic for money. In general the assets that have been pledged as collateral are government bonds, the best of the bonds are US Treasuries.

      Central banks do not have a capital structure, they have only a balance sheet. That is, their assets and liabilities match exactly. Any loan a central bank makes must be secured with an asset that is with the same or more than the amount lent.

      In general, a commercial bank or two will get into trouble at any given time and the central bank will provide liquidity against assets offered by the banks as collateral, it will also act as a broker to organize the individual banks to act in ways that serve the system interest even at some cost to these individuals. However, there are times when ALL the banks in the system have liquidity issues simultaneously … or their assets are mispriced by illiquid markets. When that occurs, the interbank market freezes and the banks cannot lend to each other, nor can they bail each other out. An insolvent bank cannot bail out another insolvent bank (otherwise Citigroup would have written checks to Lehman Brothers in September, 2008). The central banks must step in as lenders of last resort and make available the needed credit! Remember, the banks (including ‘CB’s) can lend or not lend, borrow or not borrow.

      If the commercial finance system is entirely insolvent, it can only be bailed out by an entity that is outside the system. If the central bank makes unsecured loans it INSTANTLY becomes another large insolvent commercial bank; it is insolvent for the exact same reason the other commercial banks: excess leverage! At that point there is no entity able to bail out the commercial banks, all banks are insolvent, there is no guarantor for bank liabilities, there is a run on the bank because all deposits are at risk.

      When there are runs out of markets out of currencies out of banks = the central banks is PERCEIVED to be making unsecured loans. YES, there are runs. YES central banks are seen to be making unsecured loans … but there is also the effect of dollar preference and energy deflation which do the same thing. Even a well run central bank and a (more or less) solvent finance system is going to face consequences.

      Our world is run on petroleum. Money is just a way to allocate it, right now- and going forward there is less to allocate.

  4. Creedon

    If the process is all a legit process why would the federal reserve not allow itself to be audited. My understanding is that the Bank of Japan has bought up 100 percent of government debt. Assets and liabilities must match exactly? Maybe I don’t understand exactly what assets are. I guess what you are saying is that there has to be a return on the money invested and they are still getting a return. Is the Federal Reserve getting a return on all the stuff that they bought up in 2008 and 2009? How would we know?

  5. Creedon

    If the Bank of Japan buys up government bonds at negative interest rates, that would mean that their return on investment is negative. I would believe that world wide the banks return on investment is negative. If Goldman Sachs spends millions on government bonds they can make 2.3 percent return over ten years.

    1. steve from virginia Post author

      The establishment is doing everything it can to kick the various cans down the road, but it really cannot do much. It’s tools are hand-waving and witch doctoring, public relations and stoking suspended disbelief. Central banks, including the Fed, cannot move the bond- or money markets because they are too small (not strong enough. A central bank cannot push its losses into commercial banks which under certain circumstances might result in inflation).

      The demand to audit the Fed is a political crusade for partisan advantage and nothing else. Doing so would not reveal anything important; a pointless exercise like counting the number of spaces in the Marriner Eccles Building parking garage. The Fed (or other central bank) does not have an ‘inventory’ to take account of. If the central bank accounts are unbalanced or it fails as the lender of last resort everyone knows instantly. At the same time central banks rarely fail because their operations are path-dependent and self regulating. Every banker who relies on the bank will refuse to discard the fantasy that the lender can- and will rescue its clients if necessary. The banking system is like an airplane that stays aloft only because everyone on board believes the plane can stay aloft. A person who does not believe would never risk stepping onto that plane.

      As for negative rates: real (adjusted for inflation) interest rates have been negative for some time. This is largely a market phenomenon, it indicates there is little or nothing in the physical return that offers a return, only ‘bets’ on the price direction of finance instruments. As for negative policy rates, time will tell. So far they have proven to be counterproductive.

  6. Creedon

    From the Credit Bubble Bulletin; It’s evolved into a global issue: There’s no cure for major asset Bubbles other than unwinds. Once asset inflation becomes the prevailing inflationary manifestation it becomes impossible to inflate away the problem. Instead, central bank efforts to spur general inflation only exacerbate Bubbles and maladjustment. That’s The Big Ugly Flaw in this runaway global monetary experiment. Back when he served as president of the Dallas Fed, Richard Fisher espoused some cogent advice for global central bankers: The law of holes – when you find yourself in a hole, first you must stop digging. Well, the problem today is that instead of heeding Fisher’s “stop digging” they came together, called in the big backhoes and have been shoveling fanatically ever since.

    Bloomberg’s Francine Lacqua: “Do you worry – you’ve used a lot of tools – a lot of unconventional tools. Do you worry about your balance sheet – in terms of GDP it’s higher than that Fed’s.”

  7. Tagio

    Steve,
    Regarding your “every bank does 4 things and 4 things only,” are you denying that CBs purchase assets? You seem to ignore or disbelieve that this is the primary mechanism for preventing not only bank and financial system collapse. Didn’t the Fed purchase, not loan against, the dodgy MBS that brought the system to the brink in 2008? Don’t the CBs effectively serve as “bad banks,” purchasing the bad assets of banks, giving them fresh cash at near face value, meanwhile deep sixing the losses from everyone’s sight, thereby prolonging the illusion that all is well? If it WAS a CB “loan,” I’d wager that the repayment terms of the loan are so favorable that it is effectively a purchase. For example, if it is a non- recourse loan and the sole recourse of the CB is the collateral dodgy assets, then the “loan” is effectively a purchase by the CB (for whom losses are irrelevant) with an option to re-acquire the assets by the bank by repaying the loan. If the value of the collateral has no chance of being worth the amount actually lent against it, then effectively, the CBs have purchased the assets and are deep-sixing the losses.

    It seems clear to me that the CBs prop us asset values and kick the can down the road by simply buying up the assets that are threatening to blow the system up or deflate it. Do you think I am wrong about this, and that CBs are NOT doing this? The ability to print money to buy up all assets is the other primary tool that CBs have to kick the can down the road besides interest rates. They can always save the banks by buying the banks’ dodgy assets and giving them new unencumbered cash. I fully expect the Fed to purchase the loans that the banks made to the shale oil companies , e.g., to prevent the multi billion dollar losses that those loans will suffer. How long buying financial assets can “save” the system is anyone’s guess, but even that power cannot solve all problems. It will not solve the problem of underfunded pensions, e.g., which can only be saved by a direct bailout. It will not solve the problem of declining EROI, it can only mask it for awhile while the money printing serves as a hidden subsidy to the oil extraction business.

    The upshot is I think it is highly misleading to simply refer to the activity that CBs engage in as making “collateralized loans.” In my view this gives it an air of integrity that I would wager it almost certainly does not have, because we have no assurance that the loan is actually limited to the collateral’s real value. The CBs exist to save the banks, not to enforce supposed capitalist accountability. If there is a serious mismatch between the real value of the collateral and the CBs “loan,” it is effectively a purchase and deep sixing of the losses.

    I’ll go further and opine that, if and when the Fed and other CBs do sell their assets back to the economy (banks and hedge funds), the assets sold will be far below their estimated FMV, to guaranty that the banks and hedge funds make a profit from them, much like the FedGov will grant timber rights on public lands to crony campaign contributors. Meanwhile the years that have passed while the assets sat quietly on the Fed’s balance sheet will serve as a convenient excuse to justify the decreased sales price as compared to what the Fed purchased them for – we were right to pay 100 cents on the dollar when be bought them, but things changed and now they are only worth 20 cents on the dollar. Fortunately, losses don’t matter to a CB, it can’t go insolvent!

    There is zero accountability in this process, i.e., it is guaranteed to be fraudulent, top to bottom. Not a bug, a feature.

    1. steve from virginia Post author

      ‘Asset purchases’ are simply another name for discount window operations. The only difference is the activity is taking place when there is no panic for credit, instead, to support asset prices (inflate a bubble).

      Assets are held to maturity at that point the ‘sale price’ is zero, that is, the money lent to the asset holder (credited to his reserve account) is also reduced. The holder can post more collateral; if he chooses otherwise, his reserve balance falls to zero. Credit given to the asset holder is held at the central bank as excess reserves and is not drawn until other reserves and asset holder ‘capital’ is drawn down (during a bank run). Under the circumstances, the asset holder would first fail: close up shop and go out of business before drawing down excess reserves.

      There are a lot of catch-all terms associated w/ central banks: ‘money printing’ is the most egregious. Outside of their role of lenders of last resort, central banks do little in the real world. They are, at bottom, public relations firms. The all-important price of money is not determined by interest rates or foreign exchange but by the purchase of gasoline by millions of motorists around the world every single day.

  8. Creedon

    Ellen, I have been a fan or B.W. Hill’s maximum price curve the last year or two. I think that we must wait and see. It certainly seems right now that wall street can not get the price above 54 dollars a barrel, which is the maximum price for this year. I am extremely curious as to whether the maximum price that refiners can pay continues to come down in future years.
    Maybe Tagio would like to chime in.

  9. Creedon

    Credit Bubble Bulletin: April 21 – Reuters (Vikram Subhedar): “The $1 trillion of financial assets that central banks in Europe and Japan have bought so far this year is the best explanation for the gains seen in global stocks and bonds despite lingering political risks, Bank of America Merrill Lynch said on Friday. If the current pace of central bank buying, dubbed the ‘liquidity supernova’ by BAML, continues through the year, 2017 would record their largest financial asset purchases in a decade…”

    From the report authored by BofA Merrill’s chief investment strategist Michael Hartnett: “The $1 trillion flow that conquers all… One flow that matters… $1 trillion of financial assets that central banks (European Central Banks & Bank of Japan) have bought year-to-date (= $3.6tn annualized = largest CB buying in past 10 years); ongoing Liquidity Supernova best explanation why global stocks & bonds both annualizing double-digit gains YTD despite Trump, Le Pen, China, macro.”

    A strong case can be made that Q1 2017 experienced the most egregious monetary stimulus yet. No financial or economic crisis – and none for years now. Consumer inflation trends have turned upward on a global basis. Stock prices worldwide have surged higher, with U.S. and other indices running to record highs. At the same time, global bond yields remained just off historic lows. Home prices in many key global markets have spiked upward. Meanwhile, central bank balance sheets expanded at a $3.6 TN annualized pace (from BofA) over the past four months

    1. steve from virginia Post author

      Credit Bubble Bulletin: April 21 – Reuters (Vikram Subhedar): “The $1 trillion of financial assets that central banks in Europe and Japan have bought so far this year is the best explanation for the gains seen in global stocks and bonds despite lingering political risks, Bank of America Merrill Lynch said on Friday. If the current pace of central bank buying, dubbed the ‘liquidity supernova’ by BAML, continues through the year, 2017 would record their largest financial asset purchases in a decade…”

      But … I don’t ‘buy’ it. Finance does not need any help to lend to itself. No help for the left hand to market ‘assets’ to the right hand. All that is needed is moral hazard, to prop the key men regardless of their behavior, for the government(s) to step in and bail out the ‘unlucky’ banks.

      Asset ‘buying’ is more a matter of attempting to depreciate currencies, to gain export advantages, to import external currencies that then become collateral for more leverage.

      What this says is there is little to the economy but speculating in currencies, that the only collateral that is worth anything is greener currency grass on the other side. This leaves the macroeconomic background little different from what it was in 1930 or so, when business was worthless and the only good collateral was gold.

      When the business press claims the asset inflation is the result of the central bank and ‘improper’ policies, they are absolving themselves — Wells Fargo — and the other commercial banks from any sin, when they are indeed at the center of the problem. The commercial banks’ loan portfolios are largely unsecured, massively overleveraged 10 – 20 – 30 times! They need help when gravity takes over.

      “The Fraud as Tagio above states is not allowing failure.”

      Actually, the fraud is pretending they cannot allow failure, that there is something to what it is they do besides witch doctoring.

  10. ellenanderson

    So financial assets are not like houses or cars? They are not sitting around waiting to be repossessed? Real things get used up, burned up, burned down while financial assets are just abstractions or soothing stories?
    If the federal reserve has “purchased” mortgage backed securities then who will end up owning the houses that secured them? The US treasury? It doesn’t seem to work that way. In my town the foreclosed houses have been bought up by private equity companies who are doing minimal maintenance and sitting on them while young people can’t afford housing and many are homeless. If they actually put all of the houses being hoarded on the market the price of real estate would fall.
    The problem with oil is that you can’t keep it around for all that long. Eventually you have to put it on the market.
    All very confusing.

  11. Creedon

    It’s not really that confusing, although big money has created a complexity of debt that is beyond anything that we can imagine. This debt bubble will have to unwind at some point and wars are part of that debt bubble. I think that just about everything going on, on the level of high finance is pretty much fraud of one sort or another. I would also agree with the above Credit Bubble Bulletin statement that much of the stock market bubble in the world right now is due to CB liquidity.
    Shale oil I’m sure is also being produced by CB liquidity. John Williams has been saying for years that we would see a hyper inflation event. On the level of high finance this hyper inflation event is already taking place. The whole power structure is a part of the fraud and it still serves many people. The limiting factor in all this may be oil but we shall see.

  12. Creedon

    When Janet Yellen wants to raise interest rates, it reveals that she is not aware of the Feds complicity in fraud. The fraud is best perpetrated with low interest rates, or you could say that low interest rates serve the interests of the financial elites. Raising the rates to say 10 percent would be a step toward a system of integrity. Raising the interest rates serves the interests of the illusory belief that the system is legit. We all have an interest in believing that the system is legit, because we want to stay alive.

  13. Tagio

    ellen,
    MBS are derivative securities with various payout terms backed by mortgages as the underlying assets and source from which the payments are made. The assets are held and administered in trust by the trustee of the pool for the benefit of the MBS holders. The securities holders have very limited power to direct the trustee what to do. For example and to the point, I am not an expert in this area but the Washington Mutual created MBS pool which held my own mortgage back in 2008/2009 did not give the MBS holders the power to direct the Trustee to distribute the assets (mortgages) to the MBS security holders in kind. The whole point of the Trust is to collect the amounts and distribute them to the MBS holders in accordance with their payment terms.

    When the Fed buys MBS, it buys the derivative securities, it does not acquire the mortgages themselves and would not normally have the power to cause the Trustee to transfer the mortgages to the Fed. Although the operating rule for the Fed appears to be “anything goes,” so one never knows, I can’t see why the Fed would ever want to own mortgages; I suspect the Fed respects the trust structure of the MBS pools.

    When a mortgage defaults, the bank administering the collection of the payments for the Trustee (the Trustee rarely takes any action itself; a bank usually does all of the “servicing”) will foreclose for the Trust, and ultimately the proceeds of the foreclosure will go to the Trust for distribution to the MBS holders.

    More info about the Fed’s MBS program here: https://www.newyorkfed.org/markets/mbs_faq.html
    https://therealdeal.com/2017/02/06/fed-could-look-to-sell-off-mbs-holdings/

  14. Tagio

    Creedon,
    The Hills Group ETP model seems to me to be very good, but I lack the understanding of thermodynamics and thermodynamic equations to make a proper assessment. The “validity” of any model is, not just how well it fits the known historical data but also how well it can be used to accurately predict future events. So far, the ETP model is doing well. I believe it is the only model out there besides Steve’s “triangle of doom” that predicted the oil price crash and continues to predict the upper bound of the price of crude.

    I know some engineers have recently claimed that the equations or math used in the model are wrong in a material way. I do not have the knowledge or skill to assess that. However, if that is so I believe that the person leveling the critique ought to explain how a model that is so fundamentally flawed neverthess fits the data since 1960 with like a 98% accuracy. A pretty amazing coincidence for something so flawed, n’est ce pas?

    I am not a scientist or engineer; I am a lawyer. One of my principal skills is reading – carefully- for understanding, and not reading things into the text that are not there. The ETP Model has three principal components that seem to me to capture in the broadest possible strokes the limits on oil production determined by entropy.

    1) the increasing depth and lifting costs of the average well;
    2) the inceasing water cut of the average well; and
    3) the loss of energy associated with the use of the energy (i e the maximum efficiency of a heat engine)
    1) and 3) are based on hard data, 2) had to be modeled because the hard data didn’t exist. So the ETP model has a model within it.

    Ollectively these three components determine the limits of the most favorable possible results. The energy available to the economy cannot be more than the amount left after extracting it and subtracting the inevitable loss. This approach seems fundamentally sound to me and while it might not prove accurate to a tee, is probably not far off. The only two caveats are that the model assumes that we all will keep doing what we have been doing that is, BAU, and the model is based on an “average” well. At some point BAU will break and ETP may fail to predict price. Also the model doesn’t mean that at the ETP endpoint there will not be any wells producing oil; there will be. It only those that have less entropy than the average well.
    Of course that won’t be much oil.
    ETP predicts an average price limit of $54 for this year. We are about to start month 5 of this year, and so far it looks good for Etp.

  15. Tagio

    Sorry there is a fourth component, namely the affordability curve. This is probably the weakest part of the model although it is based on hard data. It is difficult to lend it full credence because it seems that price is manipulable. However, using that curve, Hills Group was able to predict the price crash

  16. Creedon

    Ellen; I can not find the ETP model price chart for the next five years. It predicts a maximum price of 41 dollars a barrel in 2018, 26 dollars a barrel in 2019 and 12 dollars at barrel in 2020. It’s obvious that even with all the CB money printing in the world; CB liquidity; whatever you want to call it, they will not be able to keep the system working at 12 dollars a barrel. If they do it will be a wonder to behold.

  17. ellenanderson

    @Creedon: based upon the implications of the triangle of doom it already is a wonder to behold. One would have expected financial collapse well before now.
    I keep asking myself – who will end up owning the ‘real stuff’? And, for that matter who will even care want to own a lot of the ‘real stuff’ that is now considered tangible collateral for loans – vehicles, machines, depreciating houses and malls – once no one has the ability to get around?
    Did anyone look at the front page story in the NYT about fish depletion? Another example of how money, oil and technology have destroyed the earth. All of the restaurants around here are full of people eating fish. If the system had collapsed even five years ago a lot of those fish would still be swimming around. Timing matters.

    1. steve from virginia Post author

      Nobody wants a collapse. Everyone is pulling on all the strings as hard as they can to prevent one … as long as they don’t have to give up anything.

      … making everyone else give up everything.

  18. ellenanderson

    It seems to me that capital destruction is almost complete. The oil is being burned as fast as possible. We are eating the seed corn, and the littlest fishes. Too many people know that now.

  19. Eeyores enigma

    As long as people believe that they can get rich (means something different for each individual) they will continue to prefer fantasy over fact.

  20. Creedon

    Oil today is under 48 dollars per barrel. Normally at this point there are a bunch of stories in the mainstream press saying that OPEC is cutting production to get the price up.

  21. Creedon

    https://beforethecollapse.com/2017/03/17/charts-of-us-gasoline-sales-the-us-is-bleeding-out-badly-retail-sales-by-refiners-have-collapsed-by-up-to-90-in-some-states/ This link has already been put up by Tagio. What I am seeing that I have not in the past is that refinery inputs and outputs are likely more important to the price drop than B.W. Hill’s maximum affordability function. As the quality of crude being bought goes down and they have to buy more and more of it to produce less and less product the price the refineries are willing to pay would have to go down.
    This would also explain the current investment mania by wall street because they believe volume is all that matters. They are ignoring the poorer quality inputs being bought by the refineries. You would think that the refineries would have to be aware of the problem. The ability to afford gas by customers may be a component, but I would say that refineries are responsible for 70 percent of the price drop and the consumer 30 percent.
    What Cathal says above becomes apparent. Oil is in terminal decline and we are not being told. At a certain price Wall Street probably will cave. I wouldn’t hazard a guess as to when that might be.

  22. Creedon

    P.S. B.W. Hill does deserve a lot of credit because he has been one of the few voices talking about the quality of the oil for some time and he recognizes the problem at the refineries.

      1. steve from virginia Post author

        I’m still alive, but super busy-distracted.

        More info soon!

  23. Creedon

    Wall street wants to make money off of the Trump agenda, while the military industrial complex wants to destroy him. They are schizophrenic.

  24. Oilcrashing

    Hello everyone. Steve, what’s your take on this?

    “CLOGGED” WITH OIL

    From the Malacca Straits in Asia to the ports of Northern Europe and the Gulf of Mexico, drawdowns of global inventories have slowed or even reversed.

    In the Amsterdam-Rotterdam-Antwerp (ARA) region – one of the most expensive areas in Europe to store oil and the benchmark pricing point for fuel – crude is starting to flow back into storage because refiners are “clogged” with oil, an industry source handling deals in that region told Reuters.

    https://www.reuters.com/article/us-global-oil-stocks-analysis-idUSKCN18F0EO

    And on these two articles? It seems to me that the industry and Oil producing countries know that something very negative for their interests is afoot

    http://www.zerohedge.com/news/2017-05-22/goldman-warns-sharp-oil-price-drop-inventory-glut-if-backwardation-not-achieved

    http://www.zerohedge.com/news/2017-05-22/todays-stunted-oil-prices-could-cause-oil-price-shock-2020

    Best Regards everyone,

  25. Creedon

    Someone over at Peak oil news said that the oil companies are shorting the oil price in the futures market while the wall street investors are long the oil price, as if the oil companies are the ones in the know. The next two years should tell a lot of the story. Wall Street may take a big hit on oil that they are doing their best to avoid right now.

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